Healthcare Update
by Tim Meyer (TMF Attila)

McLean, VA (May 19, 1997) -- It was a pretty quiet week. If you would like to have this weekly update forwarded to your e-mail address, send a request to TMF [email protected] and I'll add you to the mail list.

OUR POLITICAL HEALTH

JACK BE NIMBLE...

The President's Advisory Commission on Consumer Protection and Quality in the Health Care Industry held its first meeting last week. This is the panel that President Clinton created by executive order during his campaign last fall (saying it was one of his top priorities) and when he named the members last month said, "Their task will be focused and urgent: to find ways to ensure quality, and to ensure that the rights of consumers in health care are protected." Originally, the groups "urgent" recommendations were going to be due in a year but at the first meeting, co-chairs Health and Human Services Secretary, Donna Shalala and Labor Secretary Alexis Herman brought a letter from Clinton asking the group to move up their deadline for producing a "Consumer Bill of Rights" on health care to this fall. Secretary Shalala told the group, "We're going to have to be very strategic on where we jump in." Secretary Herman added, "Nimble is really the key word here." The group plans to meet once a month. In addition to producing the Bill of Rights, the panel wants to "focus" on how to foster a work environment in which medical professionals are free to do their best. I can't wait to see the recommendations for that one.

NO THANKS TO MEDICARE COMPETITIVE BIDS

The American Association of Health Plans filed a lawsuit this week to prevent a proposed Medicare demonstration project from going forward in Denver. The intent of the project was for various HMO's interested in providing health care services for Medicare beneficiaries to submit bids (which is how health care services are provided for military retirees and dependents in CHAMPUS). A similar project was proposed last year in Baltimore and was abandoned after industry groups raised a stink.

MY MOTHER ALWAYS TOLD ME...

The Associated Press carried a story about an infrared detection system that alerts employers whenever workers leave the rest room without washing their hands. The badge, the Hygiene Guard system made by Net/Tech in Red Bank, N.J., triggers an infrared sensor whenever the wearer enters the rest room. Another sensor at the soap dispenser activates if the wearer remains at the sink for at least 15 seconds (from what I read you didn't need to actually use the soap, just stand there - now that's effective). Union officials (Local 54 of the Hotel Employees and Restaurant Employees International Union in Atlantic City, N.J.) are already on record voicing concern over this (As far as I know, the ACLU hasn't weighed in). Just think of the possible applications for this device (especially since we live times where "the era of big government is over"). Isn't technology great?

HEALTHCARE STOCKS IN THE NEWS

THE PROCTER & GAMBLE COMPANY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PG)") else Response.Write("(NYSE: PG)") end if %> and REGENERON PHARMACEUTICALS, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: REGN)") else Response.Write("(Nasdaq: REGN)") end if %> signed a 10-year agreement to discover, develop and commercialize products. Over the first five years of the agreement, P&G will purchase up to $60 million in Regeneron equity and provide $75 million in support of Regeneron's research efforts related to the collaboration. This is in addition to $20 million in research funding to Regeneron to be provided by P&G as part of an agreement announced in December, 1996 to develop drugs for skeletal muscle injury and atrophy. For the week, Procter & Gamble was down $1 7/8 (1.4%) closing on Monday at $131 7/8, while Regeneron was up $2 3/4 (34.9%) closing at $10 5/8.

BELO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BLC)") else Response.Write("(NYSE: BLC)") end if %> announced that it had reached an agreement in principle to sell substantially all of its interest in America's Health Network (AHN) in a transaction that will result in COLUMBIA/HCA HEALTHCARE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COL)") else Response.Write("(NYSE: COL)") end if %> holding a majority interest in AHN. Terms of the transaction were not disclosed. AHN is a 24-hour, health-oriented cable channel available to more than six million basic cable television and direct broadcast satellite subscribers in the United States. For the week, Belo was up $5/8 (1.6%) closing at $38 7/8, while Columbia/HCA was down $1 1/4 (3.3%) closing at $36 5/8.

Swiss drug company Novartis announced it was buying MERCK & CO.'s <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MRK)") else Response.Write("(NYSE: MRK)") end if %> crop protection business for about $910 million. The move was seen to be in line with Merck's gradual divesting of all non-human health care business. For the week Merck was down $1/2 (0.5%) closing on Monday at $92 1/8.

A Food and Drug Administration (FDA) advisory panel recommended approval of Xenical for treating obesity in adults. The Hoffman-La Roche Inc. drug blocks the absorption of dietary fat, rather than suppress the appetite of dieters. Hoffman-La Roche is a unit of Roche Holding AG of Switzerland.

HORIZON/CMS HEALTHCARE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HHC)") else Response.Write("(NYSE: HHC)") end if %> announced it expects to record a charge of $25.1 million in the fourth quarter related to terminated master management agreements between its Horizon Facilities management Inc. and Texas Health Enterprises Inc. units and certain of its affiliates, collectively known as HEA group. The company said under the agreement about $16.5 million in debt owed by HEA Group to Horizon Facilities and Texas Health will be repaid over five years at 8% interest and that Horizon Facilities will release HEA Group from liability of about $43.6 million in management fees, advances under the credit facility and accrued interest. For the week, Horizon/CMS was up $1 3/8 (8.4%) closing Monday at $17 3/4.

IDX SYSTEMS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IDXC)") else Response.Write("(Nasdaq: IDXC)") end if %> announced the signing of an agreement with Columbia/HCA Healthcare Corporation <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COL)") else Response.Write("(NYSE: COL)") end if %>. Columbia Physician Services has selected IDX to provide practice management and clinical information systems to its provider network nationally. For the week, IDX was up $4 3/8 (15.1%) closing at $33 3/8.

UNITED STATES SURGICAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: USS)") else Response.Write("(NYSE: USS)") end if %> announced that a Virginia jury found in favor of Applied Medical Resources Corp. of California in its patent litigation against certain US Surgical trocar products. United States Surgical will appeal the decision. The company's chairman said, "The effect of this court decision on USS' future business is expected to be minimal." Under the court ruling, if US Surgical is unsuccessful in its appeal, it will be required to pay damages for shipments of the products involved during the past 30 months. For the week, US Surgical was down $2 1/8 (6.4%) closing at $31 1/8.

EARNINGS REPORTS

FOUNDATION HEALTH SYSTEMS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FHS)") else Response.Write("(NYSE: FHS)") end if %> reported first quarter net income of $58.5 million, or 47 cents a share (two cents below estimates), on revenues of $1.89 billion, compared to 1996 first quarter net income of $62.7 million, or 50 cents a share, on revenues of $1.67 billion. The company's medical loss ratio (MLR) was 82.8% and selling, general and administrative expenses (SG&A) was 12.9%. For the week, Foundation was up $1/8 (0.4%) closing Monday at $28.

MID-ATLANTIC MEDICAL SERVICES, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MME)") else Response.Write("(NYSE: MME)") end if %> (MAMSI) reported first quarter net income of $806,000, or 2 cents a share (a cent below estimates), on revenues of $283.2 million, compared to 1996 first quarter net income of $11.9 million, or 25 cents a share, on revenues of $271.6 million. For the week, MAMSI was up $1/8 (1.0%) closing Monday at $13.

PACIFICARE HEALTH SYSTEMS, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PHSYA, PHSYB)") else Response.Write("(Nasdaq: PHSYA, PHSYB)") end if %> reported first quarter net income of $43.5 million, or $1.12 a share (a cent higher than estimates), on revenues of $1.84 billion, compared to 1996 first quarter net income of $31.9 million, or $1.01 a share, on revenues of $1.16 billion. The company's MLR was 84.5% and SG&A was 11.6%. For the week, PacifiCare 'A' shares were down $5 (6.7%) closing Monday at $70 1/8, while 'B' shares were down $4 1/8 (5.3%) closing at $74 1/8.

That will wrap it up for this week. Please share any comments/suggestions on how to improve this feature via e-mail (TMF [email protected]). Also let me know if you would like the update forwarded to your email address. In the meantime, here is hoping your investments are healthy!

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